March 2023: San Francisco Real Estate Insider

After the big decline in market activity occurring in the 2nd half of 2022, buyer demand rebounded dramatically and most market indicators turned positive in the last two months. Open house traffic, number of offers, overbidding and absorption rates all saw substantial improvement.

Even with the striking improvement in demand over late 2022, most year-over-year indicators remain depressed, but these comparisons are with the severely overheated conditions prevailing at the peak of a 10-year housing market up-cycle. The market was still just waking up this February. 

March through May is typically the most active listing and sales period of the year, and should soon provide much more data on supply, demand and price trends. 

As has been the case for the last few quarters, the biggest wildcard remains interest rates. After dropping considerably in January from a November peak, they climbed again in February with big impacts on loan application rates. It has been very challenging to predict short-term interest rate changes; even when the Fed has signaled that they will ease off on large rate increases. 

With that being said, the “boots on the ground” sense in San Francisco is that some sellers and their agent(s) are having a tough time pricing their properties. Is the home better or worse than the comps? Are some of our finishes outdated? Should we price below the competition? The result of this scenario has also put buyers in a position to be hesitant when they see a home they really like. Why has the home not sold yet after 15 days? They have 16 disclosure packages requested but no offers, what is wrong with the home? Why is it priced 10% over the neighborhood comps? I’ve seen some buyers get some very, very good values on homes that were move-in ready, spot-on properly priced, yet the interested buyers all (but one) hesitated. When you see a property you like, you need to quickly do your due diligence and be prepared to move quickly (or not). This is true of most markets, but very important in the current market. Remember, offer dates are mostly a thing of past markets. Sellers are often told their first offer is likely going to be their best offer. The buyer has nothing to lose!

On to some numbers that shed some light on pricing and demand.